"Today, the first and perhaps the only duty of the philosopher is to defend man against himself: to defend man against that extraordinary temptation toward inhumanity to which - almost without being aware of it - so many human beings today have yielded."
Gabriel Marcel

17 May 2016

Above the Law: The Age of Impunity and the Credibility Trap

"A credibility trap is a condition in which the financial, political and informational functions of a society have been compromised by corruption and fraud, so that the leadership cannot effectively reform, or even honestly address, the problems of that system without impairing and implicating, at least incidentally, a broad swath of the power structure, including themselves."

The bureaucrats, politicians, professional enablers, and financial elite are so intricately complicit in, and so benefited by, the broken system which we have now that they cannot talk about the systemic problems that are driving the real economy into a perpetual stagnation. They may talk a good game, and pledge themselves to reform in passing, but quickly turn the conversation to some emotional distraction, some other group of people to blame, some other social cause, anything but the serious subject of substantial financial reform.

They are very much a part of the problem, if not at the heart of it.

They cannot engage in effective reforms because in doing so they would:
a) indict themselves and their predecessors and colleagues, and impugn their reputation for competency and/or integrity, and
b) would hamper their very lucrative careers in a system that they cannot afford to change or meaningfully reform.

There are very serious consequences for speaking the truth these days. Insiders do not speak ill of other insiders, or they lose access to information and power. This explains much of our current problems.

Perhaps the slogan for these pampered princes and princesses should be 'it may be a rotten, broken system, but I am personally doing just fine by it.'

How can one expect real reform when the privileged control the mechanisms of power and regulation, including the very selection process that chooses which candidates can even run for public office?

This is the credibility trap.

The Age of Impunity
Jeffrey Sachs
May 13, 2016

THE PANAMA PAPERS opened yet another window on the global system of financial corruption, showing how political leaders and businesses use shell companies in secrecy havens like the British Virgin Islands and many US states to evade taxes and hide corruption and other crimes.

Yet the system of corruption depends on another factor beyond secrecy, one that is perhaps even more important: impunity. Impunity means that the rich and powerful escape from punishment even when their malfeasance is in full view.

Impunity is epidemic in America. The rich and powerful get away with their heists in broad daylight. When a politician like Bernie Sanders calls out the corruption, the New York Times and Wall Street Journal double down with their mockery over such a foolish “dreamer.”

The Journal recently opposed the corruption sentence of former Virginia governor Bob McDonnell for taking large gifts and bestowing official favors — because everybody does it. And one of its columnists praised Panama for facilitating the ability of wealthy individuals to hide their income from “predatory governments” trying to collect taxes. No kidding.

Our major institutions, the ones that should know better, are often gross enablers of impunity...

Le Propriétaire

I make every attempt to respect the rights of others. If you feel that something here has infringed your work please let me know and I will correct it immediately. It is not always easy to determine the status of material posted to the Internet with regard to fair use and public domain.

Need Little - Want Less - Love More

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

"In the Incarnation the whole human race recovers the dignity of the image of God. Thereafter, any attack even on the least of men is an attack on Christ, who took on the form of man, and in his own Person restored the image of God in all. Through our relationship with the Incarnation, we recover our true humanity, and at the same time are delivered from that perverse individualism which is the consequence of sin, and recover our solidarity with all mankind." Dietrich Bonhoeffer

"A credibility trap is when the managerial functions of a society have been sufficiently compromised by corruption so that the leadership cannot reform, or even honestly address, the problems of that system without implicating a broad swath of the powerful, including themselves.

The moneyed interests and their aspirants tolerate the corruption because they have profited from it, and would like to continue to do so. Discipline is maintained by various forms of soft financial rewards and career and social coercion."

These are personal observations about the economy and the markets. In providing information, I hope this allows you to make your own decisions in an informed manner, even if it is from learning by my mistakes, which are many. As a standing policy I never provide individual investment advice to anyone. I will only occasionally disclose my personal positions for purposes of illustration. Understand that my own circumstances could differ greatly from your own, and therefore what is suitable for me may not be suitable for you. My comments are intended to be reflection on general macro financial and economic events and trends.